Last Thursday when we recounted the story of how Venezuela is now literally flying in paper money (using three dozen cargo Boeing 747s), we wrote that “Venezuela’s hyperinflation, already tentatively estimated at 720%, will likely add on a few (hundred) zeroes by this time next year. It is also quite likely that Venezuela the country, as we know it now, will no longer exist because once any nation is swept up in hyper-inflationary rapids two things occur like clockwork: social uprisings and political coups.

But before it gets there, Venezuela’s president Maduro will be busy liquidating the nation’s roughly $12 billion in gold reserves, which his late predecessor fought hard in 2011 to repatriate back to Caracas. Sadly that gold was never meant to stay in Venezuela after all.”

And sure enough, just a day later, Reuters writes that Venezuela’s central bank has begun negotiations with the suddenly troubled Deutsche Bank to carry out gold swaps “to improve the liquidity of its foreign reserves as it faces heavy debt payments this year”, payments which it won’t be able to fund unless it manages to “liquify” its gold.

One look at Venezuela’s CDS which imply a 78% probability of default in the next year reflect the $9.5 billion in debt service costs this year.

The problem is that around 64% 15.4% of Venezuela’s $15.4 billion in foreign reserves, or around $10 billion, are held in gold bars, “which limits President Nicolas Maduro’s government’s ability to quickly mobilize hard currency for imports or debt service.”

As Reuters reminds us, in December, Deutsche and Venezuela’s central bank agreed to finalize a gold swap this year.

Technically, gold swaps allow central banks to receive cash from financial institutions in exchange for lending gold during a specific period of time. They do not tend to affect gold prices because the gold is still owned by Venezuela and does not enter the market.

The problem is that a swap when arranged with a technically insolvent nation is the equivalent of pledging gold for cash, which is precisely what Venezuela will do. Said pledge implies that once Venezuela has to fund the unwind of the swap, which will itself cost billions of dollars Maduro will not have, it will effectively hand over the gold to the counterparty, in this case Deutsche Bank.

Reuters also adds that according to its sources “Venezuela in recent years had been carrying out gold swaps with the Switzerland-based Bank for International Settlements (BIS) in operations ranging in duration from a week to a year. One source said Venezuela conducted a total of seven such transactions. BIS halted these operations last year, both sources said, as a result of concerns about the associated risks. BIS declined to comment.”

Meanwhile Venezula has been burning down its gold reserves:

Under the rule of late socialist leader Hugo Chavez, the central bank used billions of dollars in cash reserves to finance social programs and off-budget investment funds. This meant that gold became a larger percentage of reserves.

The value of Venezuela’s monetary gold has declined by $3.5 billion in the 12 months ended in November to reach $10.9 billion, central bank data shows. This appears to reflect swap operations and a 10 percent decline in the price of gold. It was not immediately evident if the central bank has also been selling gold.

The central bank in 2015 carried out a swap with Citigroup Inc’s (C.N) Citibank, according to one of the sources. Citi declined to comment in 2015.

And here is the punchline: “One of the sources said the central bank has taken an unspecified amount of gold out of the country so that it can be certified, which is required for gold that is used in such swaps. The gold lost its “certificate of good delivery” in 2011 when Chavez transferred it from foreign banks to central bank coffers, one of the sources said.”

In other words, after Maduro’s predecessor Chavez worked hard to repatriate the nation’s gold in 2011, Maduro is already doing his best to unwind all such actions, which while proving that gold is indeed money contrary to popular misconceptions by U.S. central bankers, will likely leave a bitter taste in the mouth of Venezuela citizens who will soon realize that their ruler sold off the country’s last remaining assets just to avert debt defaults for a few months.

Finally for those interested when the gold may officially change ownership, if only on paper for the time being, they should just keep track of Venezuela’s upcoming bond maturities, which include $1.5 billion 2016 Global Bond comes due at the end of February, while state oil company PDVSA faces payments of $2.3 billion on its 2017N bond in October and $435 million on its 2016 bond in November.

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Oliver Wright is an international lawyer, financier, and published author. He is the Founder and CEO of Vanquish Merchant Bank. His writings appear in journals such as the Harvard Journal of International Press-Politics. For six years Oliver was an international litigator and corporate attorney practicing cross-border mergers and acquisitions at Gibson, Dunn & Crutcher, the top ranked litigation firm in the country. Oliver Wright holds dual Master and Doctor of Law degrees in International and Comparative Law from Cornell Law School, where he graduated with honors and was Editor of the Cornell Law Review. He was class major valedictorian at UCLA, where he graduated summa cum laude, phi beta kappa with a BA in Communications Studies.